Federal government.
Public debt of the federal government of Belgium The public debt of the federal government is special in two ways. One of which is the fact that it is remarkably high, the biggest of all participating countries in this project. The fourth biggest in the EU and somewhere between the 10th and 15th worldwide. The second particularity is the composition of our national debt: 90% consists of tradable debt and most of that debt is a long term loan (Agentschap van Schuld, 2016) We will now compare each country with this norm. The figures are from 2014. Concerning budget surplus or deficit Poland is the worst country, with a deficit of -3.3. after Poland comes Belgium with a deficit of -3.1, Followed by Austria, -2.7, thereafter we have Sweden with -1.7, and the best country is Germany with a surplus of 0.3% of the GDP. Concerning the public debt Belgium is the worst student with an average public debt of 106.7 percent of the GDP, thereafter comes Austria with 84.2 percent, then Germany 74.9 percent, then Poland with 50.4 % and the best country here is Sweden with 44.9%. We also compared the United States with this norm. They had a deficit of 2.8% and a public debt of 103 %. Conclusion: only Sweden passes (Eurostat, 2016. Tradingeconomics, 2016.Verdrag betreffende de Europese Unie) . The reason for the high public debt can be found in the political past of Belgium. Belgium consists of two main parts: The Flemish region and the Walloon region. Whenever a big public investment happened in one region, politicians of the other part wanted a similar investment in their region. This has led to a series of big works that were never finished or when finished were hardly used. The political need for investments in both parts of the country is called the ‘wafelijzerpolitiek’, freely translated as waffle iron politics. Next to this, Belgium has reached such a big debt due to subsidies for disappearing industries. Our country has spent way too much money on dying industries such as steel production, coal mining, glass production and so on. Most of these industries have now been offshored (Belgische schuld is een uitschieter, 2016) Although our national debt is currently very high, it has been much higher in the past. From 1998 till 2007 the Belgian debt was constantly decreasing. Between 2008 and 2014 it was rising again due to the financial crisis. Luckily the latest trends show a decrease (Agentschap van Schuld, 2016). As we have said most of our national debt consists of tradable debt. To be more specific: 80% (2015) consists of linear bonds. Linear bonds or OLOs are pieces of evidence that a person, in reality a financial institution has lend out money to the state. OLOs can only be bought by primary and recognized dealers. These are financial institutions that possess the exclusive right to buy bonds. Each institution has to own at least 2% of the OLOs to be considered a primary dealer. The primary and recognized dealers are also obliged to buy 2% of the OLOs at every sales moment, because bonds are only sold on specific times. Only two Belgian banks are primary dealers and considering the fact that OLOs make up roughly between 80 to 90 percent of our national debt, this means that most of the Belgian debt is in hands of foreign banks (agentschap van Schuld, 2016). An important part of our tradable debt is bought by the European Central Bank. They started to buy European bonds in January 2015 and will do so until march 2017. The organization buys 60 billion euro of national bonds every month, in all the countries of the EU, in order to ensure a stable inflation rate of around two percent and to lower the interest on bonds. This measure is controversial. Especially Germany does not like this measure, because they emphasize on budgetary discipline for each country. It was also Germany who put pressure on the implementation of the Maastricht norm. The German politicians are opined that each country should have a good budgetary discipline and the current policy of the European central bank is the complete opposite of that. Next to all this is the fact that some economists doubt the positive effect of the policy of the ECB (Europa nu, 2016). The expenses of the federal government in 2016 will be 52 billion. The so called authority cell represents the biggest expense post, consisting of among others: the army, justice, foreign affairs, domestic affairs etc. In the last six years Belgium spent less and less on the army, foreign affairs and development. In the same time the expenses on domestic affairs almost doubled. The second expense post is the social cell, consisting of pensions, public health, social security and so on. An interesting fact is that the expenditure on pensions rises year after year. This comes due to the aging of the Belgian population. As we can see the amount of people older than 65 has risen with 300 000 in the last decade. In 2010 Belgium paid 8 billion on pensions, this will be 10.7 billion this year. The third expense post is the economic cell which represents the expenses on economic stimulation. This remained quite stable over the last few years (Federale overheid, 2016. FOD economie, 2016) We will now handle the revenues of the federal government. The Federal government will receive a total of 112 billion euro in 2016. It gives 2.8 billion to the European Union. 41 billion euro goes to the communities and regions. 10 billion to social security. This means that the federal government has 57 billion of means (Federale overheid, 2016. FOD economie, 2016) To recapitulate: the federal government has a revenue of 57 billion and spends 64 billion. This means that there is a gap of 7 billion euro. The deficit of Belgium will be 2.6 % of the gross domestic product. This is conform the Maastricht norm which obligates a European nation to have a deficit of less than 3% (Federale overheid, 2016. FOD economie,2016).